Read my lips: no more Thatcherism: In delivering three Budgets for the price of one, Norman Lamont has rediscovered Keynesian instincts, writes Christopher Huhne

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The Chancellor was faced with a conundrum. How do you present a Budget that does very little as a Budget that does a lot? Yesterday's answer was to present next year's Budget instead of this year's. Indeed, Norman Lamont has pre-empted so many of the decisions for the 1994 and 1995 Budgets that he must hope that he is allowed to stay on to deliver them. It is hardly worth anyone else doing so.

In one sense, Mr Lamont's Budget is a brave one. The weight of backbench opinion, and the tougher voices in the City, had been calling for an immediate attack on the budget deficit. In a culture that likes to equate virtue with discomfort, Mr Lamont could easily have presented himself in a hair shirt, puritanically raising the revenue that we all know must eventually be raised. Instead, he has raised an extra pounds 490m in 1993-94, a figure close to negligible in an economy whose output will be worth some pounds 628bn. Tackling the deficit is postponed to 1994-95 and 1995-96.

This caution about the coming financial year tells us two things. The first is that the recovery is still less well rooted than the Chancellor likes to proclaim. If it were strong, he would certainly have taken the opportunity to raise more revenue. The Government, after all, has no political interest in deferring large tax increases close to the next general election.

The second message is that Thatcherite economic management is dying, if not dead. Lord Lawson's call for pounds 6bn of tax increases earlier this week to tackle the deficit - ironically, precisely the amount that his ill-judged 1988 Budget injected into a booming economy - was the authentic voice of Thatcherism. Only monetary policy and interest rates matter in managing spending; budget policy is merely about encouraging effort.

By explicitly rejecting the Thatcherite canon, Mr Lamont has unintentionally vindicated the 364 economists who protested against tax rises at the bottom of the last recession in 1981. The leading figures in the Conservative Party evidently believe that the dissident economists were right after all: putting up taxes does slow down a recovery. The spirit

of Lord Keynes still walks in Treasury chambers.

Mr Lamont's Keynesian instincts accord with those of the City, judging by the markets' reaction. The foreign exchanges promptly pushed up the pound, voting that this was indeed a Budget for recovery. They believed the Treasury murmurs that there are few, if any, further interest rate cuts in the pipeline.

Even the bond market, now faced with absorbing a deficit of pounds 50bn next year, may warm to the central innovation in the package. The Chancellor has rightly tried to buy room for manoeuvre in tackling today's recession by promising fiscal responsibility in tomorrow's recovery. He has gone out of his way to deal with the Achilles' heel of Keynesian economics, which is that politicians happily run big deficits in the hard times but then funk the decisions needed to rein them back.

At present the markets are being wary, regarding the tax increases in 1994-95 and 1995-96 as so many hopeful promises. They can cite the US experience of promised deficit cuts that never materialised. But this is probably unfair.

The whole point of the three Budgets for the price of one is that these revenue- raising measures are not just vague promises. They are detailed measures - an extension of VAT to fuel and light, a cut in the value of mortgage tax relief and married couple's allowances, a rise in petrol duties - which will be incorporated in the Finance Bill this year. They will then take place automatically, requiring no further legislative change. They will be part of the furniture that future Chancellors will find hard to move.

The only risk is that the recovery will still not be strong enough even in a year's time to withstand the pounds 6.7bn of tax increases in 1994-95. The Lawson-Thatcher boom has left a terrible legacy of high debt which means that people are unlikely to spend freely even with low interest rates and a diminishing fear of job losses. We must hope that the fall in the pound is compensation enough for the gathering recession in our principal Continental markets.

So the central judgement about how to promote the recovery deserves praise. It is a more imaginative and sensible use of fiscal policy than for many years. The business package is also a wise use of what little extra revenue the Chancellor found next year. The reforms of advanced corporation tax and petroleum revenue tax repeat the pattern of short-term concessions followed by long-run increases in revenue. The relief against capital gains tax for entrepreneurs makes sense, as does the subvention on business rates.

There are, though, important cavils. The first is that the Chancellor has done relatively little to relieve two of the most serious problems weighing down the economy: the fear of high debt and falling house prices, and the fear of unemployment.

Most first-time house buyers will now be relieved of stamp duty, but this is worth a maximum of pounds 600 to someone buying a pounds 60,000 flat or house. Given that a first- time buyer in the South-east last January would now have lost their entire deposit because of falling prices, this is not much incentive. A more robust scheme to lure buyers back into the market would have been sensible.

The jobs package is also a half- measure. The pilot scheme to encourage employers to take on the long-term unemployed could, in principle, be the beginning of a real attempt to solve the problem. But the jobs package, at a cost of just pounds 230m, looks little more than a bow to those who have been arguing for Swedish-style active labour market policies.

But the most important drawback in the package, admirably demonstrated by Holly Sutherland's article on page 2, is its unfairness. Indirect taxes on basic needs like fuel hit the poor harder than the rich because they form a larger proportion of the budgets of the poor. Even after allowing for some offsetting effects (such as the cut in the value of tax reliefs for top-rate payers), the Budget measures are regressive.

Since the well-off in British society have enjoyed a peculiarly prosperous decade, it seems harsh to heap further indignities on those who have benefited least from the Thatcher years. But there is also an economic effect. Because the poor spend a higher proportion of their total income than the rich, such a shift in the tax burden is likely to have a particularly discouraging effect on consumers' spending. Mr Lamont has rediscovered Lord Keynes; sadly he has yet to find Lord Beveridge.